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Thursday, September 29, 2022

 

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Court of Appeal:

Defendant Forfeited Arbitration by Not Paying Arbitrator’s Fee Within 30 Days of Due-Date

Bendix Declares That Clerical Error Causing No Prejudice Does Not Justify Relief

 

By a MetNews Staff Writer

 

A defendant’s failure to pay an arbitrator’s fee within 30 days of the due date constituted a waiver of the contractual right to arbitration, Div. One of this district’s Court of Appeal has held, declaring that a Los Angeles Superior Court judge lacked the power to grant relief from the timeliness requirement of Code of Civil Procedure §1281.97.

Justice Helen I. Bendix authored the opinion, filed Tuesday, which grants a writ of mandate directing that the Los Angeles Superior Court allow plaintiff Rosa M. Quincoza Espinoza to have her employment discrimination claims against Centinela Skilled Nursing & Wellness Centre West, LLC tried in court.

The case was ordered to arbitration on May 3, 2021 and the parties agreed to arbitration by retired Los Angeles Superior Court Judge Richard Stone at Signature, an alternate dispute resolution firm. On May 24, 2021, Signature sent an invoice to the defense counsel for $4,900, the initial fee, with a due-date of May 31.

Wording of Provision

Code of Civil Procedure §1281.97(a)(1) provides:

“In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration provider, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration under Section 1281.2.”

Espinoza was told by Signature on July 1, upon inquiry by her, that Centinela had not paid the fee, and she moved for an order vacating the stay of court proceeding. On July 9, Signature confirmed that payment had been made.

Fruin’s Ruling

Los Angeles Superior Court Judge Richard L. Fruin on July 29 denied the motion, saying:

“The Court finds the defendant in substantially compliance with the arbitration provision and not in material breach of the arbitration agreement. Defendant offers…[a] declaration explaining that the facility vice president approved payment of the invoice on June 15 and forwarded the invoice for payment but advised that the invoice was not paid then due to ‘clerical error.’ Plaintiff suffered no material prejudice from defendant’s delay in paying the invoice. As evidence of no material prejudice, counsel engaged in settlement discussions in about June 15 without plaintiff expressing concern that the invoice was not by then paid.”

Bendix wrote:

“The language of section 1281.97 is unambiguous. It provides that the drafting party is in ‘material breach,’ and the nondrafting party is entitled to the remedies under the statute, ‘if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date....’….Under the plain language of the statute, then, the triggering event is nothing more than nonpayment of fees within the 30-day period—the statute specifies no other required findings, such as whether the nonpayment was deliberate or inadvertent, or whether the delay prejudiced the nondrafting party. The plain language therefore indicates the Legislature intended the statute to be strictly applied whenever a drafting party failed to pay by the statutory deadline.”

No Absurd Results

The jurist went on to say:

“We do not agree that applying the statute strictly, even when nonpayment is inadvertent, leads to absurd consequences.  Although strict application may in some cases impose costs on drafting parties for innocent mistakes, the Legislature could have concluded a brightline rule is preferable to requiring the nondrafting party to incur further delay and expense establishing the nonpayment was intentional and prejudicial. The Legislature also reasonably could have decided that whatever the reason for a delay in payment, the drafting party should bear the consequences of that delay rather than the nondrafting party.”

Centinela also argued that §1281.97 is preempted by the Federal Arbitration Act. Bendix expressed agreement with the July 25 Court of Appeal opinion by Justice Brian M. Hoffstadt of this district’s Div. Two in Gallo v. Wood Ranch USA, Inc. in which the question was presented whether §1281.97 and two related sections are in conflict with the FAA.

Hoffstadt said:

“We hold that they are not because the procedures they prescribe further—rather than frustrate—the objectives of the FAA to honor the parties’ intent to arbitrate and to preserve arbitration as a speedy and effective alternative forum for resolving disputes.”

Div. One initially ordered the cause submitted on Aug. 12 but vacated the submission on Aug. 22 to afford the parties the opportunity to address the decision in Gallo.

Bendix’s opinion directs that on remand, the court consider Espinoza’s motion for sanctions, under §1281.99, which Fruin did not consider in light of his ruling on the motion to vacate the stay.

The case is Espinoza v. Superior Court (Centinela Skilled Nursing & Wellness Centre West), 2022 S.O.S. 5088.

 

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